Energy Transfer to buy SemGroup for $1.35bn

US oil and gas pipeline company Energy Transfer has agreed to buy smaller rival SemGroup Corp for $1.35bn.

Under the terms of the deal, which has been unanimously recommended by the boards of directors of both companies, Energy Transfer will pay $6.80 per share in cash and 0.7275 shares for each outstanding share of SemGroup. This represents a premium of 65% to the closing price of SemGroup shares on Friday.

The combined company is expected to generate more than $170m of annual run-rate synergies, consisting of commercial and operational synergies of $80m, financial savings of $50m and cost savings of $40m.

SemGroup's chief executive officer, Carlin Conner, said: "This strategically and financially compelling combination will result in SemGroup joining one of the largest midstream energy companies in the country, with a strong footprint in all major US production basins.

"SemGroup has been exploring a range of strategic alternatives aimed at increasing shareholder value, and determined that this combination with ET is in the best interests of shareholders - providing immediate value, a significant premium, and opportunity to participate in the future upside of the combined business.

"Our transaction with ET underscores the strength of SemGroup’s assets, and is a testament to our employees’ dedication, hard work and focus on providing safe, efficient and reliable service while creating an asset portfolio that is highly desired.”

The deal is expected to close late this year or early next year.